Rising crude oil price drives up cost of synthetic textile raw materials

Raw materials have become costlier by two to five per cent over the past month for synthetic textile manufactures, due to a sharp increase in crude oil prices.

Brent crude rose 15.2 per cent in a month to its current $64.12 a barrel for spot delivery. This followed developments in Saudi Arabia and a rise in US-North Korea geopolitical tension. Purified terephthalic acid (PTA) is a crude oil derivative and an input for polyester fibre. It was $692 a tonne on Tuesday, a rise of 4.5 per cent in November alone. MEG (mono-ethylene glycol) has become costlier by 2.8 per cent in November, to $928 a tonne on Tuesday. Other raw materials have also become costlier.

“Prices of polyester staple fibre have risen by 10 per cent over the past two months to Rs 82 a kg, due to an increase in crude oil prices. China, a large producer for recycled polyester staple fibre produced from PET (polyethylene terephthalate) bottles, has stopped procurement of such bottles, resulting in a shortage of raw material for their fibre manufacturing plants. Hence, prices of recycled polyester staple fibre have gone up,” said S K Khandelia, president, Sutlej Textiles and Industries, largest manufacturer of coloured yarn in India.

Companies in plastics are also impacted. Indo Rama Synthetics, this country's largest polyester-only manufacturer, had a net loss of Rs 17.7 crore in the September quarter, compared to a loss of Rs 14.7 crore for the same quarter a year before.

“GST (goods and services tax) rates on some products were cut from 18 per cent to 12 per cent, which came as a relief for us. Raw material prices have jumped by two to five per cent, due to rising crude oil prices. We expect a further increase in prices of raw materials in the short term. But, with growing demand for polyester products, we were able to pass on the raw material price hike to consumers," said O P Lohia, chairman of Indo Rama.